Finance (No. 2) Bill (HC Bill 154)

(a) the pre-completion transaction is an assignment of rights,
and

(b) either the subject-matter of the original contract is
conveyed to the transferee or the original contract is
5substantially performed by the transferee.

(2) This paragraph does not apply if the original contract is itself a
free-standing transfer.

(3) In relation to a relevant land transaction, the general rule is that
references in this Part of this Act to the vendor are to be read as
10references to the vendor under the original contract (but see sub-
paragraphs (4) and (5)).

(4) In cases where the original contract was substantially performed
before the transferee became entitled to call for a conveyance of
the whole or part of the subject-matter of the original contract,
15references in this Part of this Act to the vendor are to be read as
references to the person who was the purchaser under the original
contract when it was substantially performed.

(5) In relation to a relevant land transaction, references to the vendor
in the specified provisions (see sub-paragraph (6)) are to be read
20as including—

(a) the vendor under the original contract, and

(b) the transferor under any relevant assignment of rights.

(6) The specified provisions are—

(a) section 61(1)(a) (compliance with planning obligations:
25conditions for exemption);

(b) section 66(1) and (2) (transfers involving public bodies);

(c) paragraph 8(1)(a) of Schedule 4 (debt as consideration);

(d) paragraph 10(2)(c) of Schedule 4 (carrying out of works);

(e) paragraph 16 of Schedule 4 (indemnity given by vendor).

(7) 30The following are “relevant land transactions”—

(a) the land transaction effected by the conveyance mentioned
in sub-paragraph (1)(b) or treated as effected by the
substantial performance mentioned in that provision;

(b) the notional land transaction mentioned in paragraph
355(1)(b) and any additional land transaction under
paragraph 5(2).

(8) In determining under section 108(1) whether or not a relevant land
transaction such as is mentioned in sub-paragraph (7)(a) is linked
to another transaction, it may be assumed that any of the following
40is the vendor under the relevant land transaction—

(a) the vendor (determined in accordance with sub-paragraph
(3)), or

(b) the transferor under any relevant assignment of rights.

(9) The following are “relevant assignments of rights” in relation to a
45relevant land transaction—

(a) the assignment of rights mentioned in sub-paragraph
(1)(a);

(b) any other transaction that is an assignment of rights in
relation to the original contract and has some subject-
5matter in common with the assignment of rights
mentioned in paragraph (a).

Free-standing transfers: consideration and substantial performance

9 (1) This paragraph applies where the pre-completion transaction is a
free-standing transfer.

(2) 10If the transferee acquires the subject-matter of the free-standing
transfer, the consideration for the transaction effecting that
acquisition is taken to include the consideration given for the free-
standing transfer (if that would not otherwise be the case).

(3) References in sub-paragraph (2) to an acquisition include an
15acquisition deemed to take place under section 44(4) (and the
reference to the transaction effecting that acquisition is read
accordingly).

(4) An action taken by the transferee (or an assignee of the transferee)
that would, if taken by the original purchaser, constitute (for the
20purposes of section 44(5)) the taking of possession of the whole or
substantially the whole of the subject-matter of the original
contract is treated as effecting the substantial performance of the
original contract.

(5) If a transaction that is a free-standing transfer in relation a contract
25is also a free-standing transfer in relation to another contract (in
particular, where there have been successive free-standing
transfers), each of those contracts may be regarded as “the original
contract” for the purposes of separate applications of sub-
paragraph (4).

(6) 30In sub-paragraph (4)—

(a) the reference to the transferee includes a person connected
with the transferee, and

(b) the reference to an assignee of the transferee includes a
person connected with such a person.

(7) 35References in this paragraph to an assignee of the transferee are to
a person who, as a result of a transaction that is an assignment of
rights in relation to the free-standing transfer, is entitled to call for
a conveyance of the whole or part of the subject-matter of the free-
standing transfer.

40Meaning of “the vendor”: cases involving free-standing transfers

10 (1) This paragraph applies where—

(a) a land transaction is effected, or treated as effected, by an
acquisition falling within paragraph 9(2) (read with
paragraph 9(3)), or

(b) 45paragraph 8(1) (meaning of “vendor” where the transferee
is the assignee under an assignment of rights) would apply

but for paragraph 8(2) (exclusion of cases where the
original contract is itself a free-standing transfer).

(2) In this paragraph “the relevant land transaction” means the land
transaction—

(a) 5mentioned in sub-paragraph (1)(a), or

(b) in a case falling within sub-paragraph (1)(b), effected by
the conveyance to the transferee of the subject-matter of
the original contract or the substantial performance by the
transferee of the original contract.

(3) 10References in this paragraph to “the specified transaction” are to—

(a) the free-standing transfer mentioned in paragraph 9(2), or

(b) the original contract the subject-matter of which is
conveyed to the transferee or which is substantially
performed by the transferee.

(4) 15The general rule is that in relation to the relevant land transaction
references in this Part of this Act to “the vendor” are to be read as
references to the vendor or (as the case may be) transferor under
the first appropriate transaction (but see sub-paragraph (5)).

(5) In relation to the relevant land transaction, references to the
20vendor in the specified provisions (see sub-paragraph (6)) are to
be read as including—

(a) the vendor under the first appropriate transaction, and

(b) each person who is the transferor in the case of a relevant
pre-completion transaction.

(6) 25The specified provisions are—

(a) section 61(1)(a) (compliance with planning obligations:
conditions for exemption);

(b) section 66(1) and (2) (transfers involving public bodies);

(c) paragraph 8(1)(a) of Schedule 4 (debt as consideration);

(d) 30paragraph 10(2)(c) of Schedule 4 (carrying out of works);

(e) paragraph 16 of Schedule 4 (indemnity given by vendor).

(7) In determining under section 108(1) whether or not the relevant
land transaction is linked to another transaction it may be
assumed that any of the following is the vendor under the relevant
35land transaction—

(a) the vendor (determined under sub-paragraph (4)), or

(b) the transferor under any relevant pre-completion
transaction.

(8) The following are “relevant pre-completion transactions” in
40relation to the relevant land transaction—

(a) the specified transaction;

(b) any other transaction that is a pre-completion transaction
in relation to the original contract and has some subject-
matter in common with the specified transaction.

Paragraph 10: “the first appropriate transaction” and “the original contract”

11 (1) Subject to the following provisions of this paragraph, “the first
appropriate transaction” means the original contract.

(2) If the original contract is not performed at the same time as, and in
5connection with the performance of, the specified transaction, “the
first appropriate transaction” means a transaction that is a pre-
completion transaction in relation to the original contract and
meets the following conditions.

(3) The conditions are that the pre-completion transaction—

(a) 10is performed at the time when the specified transaction is
performed and (if it is not itself the specified transaction) is
performed in connection with the performance of the
specified transaction,

(b) is a transaction on which the entitlement of the transferee
15to call for the conveyance of the subject-matter of the
specified transaction depends, and

(c) is not preceded by another pre-completion transaction
meeting the conditions in paragraphs (a) and (b).

(4) For the purposes of this paragraph—

(a) 20a contract for a land transaction is taken to be “performed”
when it is substantially performed or completed
(whichever is earlier);

(b) a free-standing transfer other than a contract is taken to be
“performed” when the transferee under that free-standing
25transfer (or an assignee of that transferee, as defined in
paragraph 9(7)) acquires the subject-matter of that free-
standing transfer.

(5) Where the specified transaction is a pre-completion transaction in
relation to each of two or more contracts such as are mentioned in
30paragraph 1(1)(a) that together form a series of such contracts
(each having some subject-matter in common with all the others),
references in paragraph 10 and this paragraph to “the original
contract” are to be read as references to the first contract in that
series.

(6) 35In this paragraph “the specified transaction” has the meaning
given by paragraph 10(3).

Minimum consideration rule

12 (1) This paragraph applies where either of the following provisions
applies—

(a) 40paragraph 4(3) (assignment of rights: chargeable interest
acquired or treated as acquired by transferee);

(b) paragraph 9(2) (free-standing transfers: chargeable interest
acquired or treated as acquired by transferee).

(2) If there is a relevant connection between parties, then for the
45purposes of paragraph 1(1) of Schedule 4 the consideration given
by the purchaser for the subject-matter of the land transaction
referred to in paragraph 4(4) or 9(2) is taken to be—

(a) the amount that it would be apart from this sub-
paragraph, or

(b) (if higher) the first minimum amount, or

(c) (if higher than both those amounts) the second minimum
5amount.

(3) There is a “relevant connection between parties” if—

(a) the persons who are the transferor and transferee in
relation to the pre-completion transaction mentioned in
paragraph 4(1) or 9(1) (“the implemented transaction”) are
10connected with each other, or are not acting at arm’s
length, or

(b) sub-paragraph (4) applies.

(4) This sub-paragraph applies if—

(a) the implemented transaction is one in a chain of successive
15transactions (all having at least part of their subject-matter
in common) that are pre-completion transactions in
relation to the original contract, and

(b) a person who is the transferor in relation to a pre-
completion transaction that precedes the implemented
20transaction in the chain of transactions is connected with,
or not acting at arm’s length in relation to, the transferee
under the implemented transaction.

(5) Where the implemented transaction is a pre-completion
transaction in relation to—

(a) 25a contract for a land transaction that is not itself a free-
standing transfer in relation to any other contract, and

(b) a contract, or two or more successive contracts, that are
themselves free-standing transfers in relation to the
contract mentioned in paragraph (a),

30references in this paragraph to “the original contract” are to the
contract mentioned in paragraph (a) (and do not include any
contract mentioned in paragraph (b)).

The first minimum amount

13 (1) “The first minimum amount” means—

(a) 35if the chargeable interest acquired (or treated as acquired)
under the land transaction referred to in paragraph 4(4) or
9(2) is the whole subject-matter of the original contract, the
amount of any consideration (in money or money’s worth)
agreed to be given, under the terms of the original contract,
40for the acquisition of that subject-matter, or

(b) if paragraph (a) does not apply, so much of the amount
mentioned in paragraph (a) as is referable, on a just and
reasonable apportionment, to the chargeable interest
mentioned in that paragraph.

45This is subject to sub-paragraph (2).

(2) If conditions A to C are met, “the first minimum amount” means
the amount of any consideration (in money or money’s worth)
agreed, under the terms of the transfer to the first T, to be given in

respect of the subject-matter of that transaction (including any
consideration relating to an obligation of the transferor under the
transfer to the first T).

(3) The conditions mentioned in sub-paragraph (2) are as follows.

• 5Condition A is that the pre-completion transaction referred to
  in paragraph 4(4) or 9(2) is one of a chain of successive
  transactions (all having at least part of their subject-matter
  in common) that are pre-completion transactions in
  relation to the original contract.

• 10Condition B is that a person (“T”) is the transferor under a
  pre-completion transaction that forms part of that chain
  and T is connected with, or not acting at arm’s length in
  relation to—

• (a)

  the transferee under that transaction, or

  (b)

  15the transferee under a subsequent transaction in the
  chain.

• Condition C is that having regard to all the circumstances it
  would not be reasonable to conclude that the obtaining of
  a tax advantage (for any person) was the main purpose, or
  20one of main purposes, of T in entering into—

  (a)

  any pre-completion transaction in the chain, or

  (b)

  any arrangements of which such a transaction forms
  part.

(4) Where conditions A to C are met, “the first T” means—

(a) 25if condition B is met in relation to only one pre-completion
transaction, T, or

(b) if condition B is met in relation to more than one pre-
completion transaction in the chain, the transferor in
relation to the first of the pre-completion transactions in
30relation to which condition B is met.

(5) In this paragraph “the transfer to the first T” means—

(a) the pre-completion transaction under which the first T is
the transferee, or

(b) the original contract (if T is the original purchaser).

(6) 35In this paragraph—

(a) references to “the original contract” are to be read in
accordance with paragraph 12(5) (and references to the
original purchaser are to be read accordingly);

(b) “tax advantage” has the same meaning as in paragraph 18.

40The second minimum amount

14 (1) In paragraph 12 “the second minimum amount” means the total of
the net amounts of consideration given by the relevant parties.

(2) The net amount of consideration given by any relevant party is—

If CR is greater than CP, the net amount of consideration given by
5the relevant party is taken to be zero.

(3) Except where sub-paragraph (4) applies, the relevant parties for
the purposes of this paragraph are—

(a) the original purchaser, and

(b) the transferee.

(4) 10If the pre-completion transaction referred to in paragraph 4(4) or
9(2) (“the implemented transaction”) is one in a chain of successive
transactions (having at least part of their subject-matter in
common) that are pre-completion transactions in relation to the
original contract, only the following are relevant parties—

(a) 15the persons who are the transferor and transferee in
relation to the implemented transaction;

(b) a person who is the transferor in relation to preceding
transaction, if that person is connected with, or not acting
at arm’s length in relation to, the transferee under the
20implemented transaction,

(c) the transferee under a pre-completion transaction, if the
transferor is a relevant party (whether by virtue of this
paragraph (c) or otherwise).

(5) For the purposes of sub-paragraph (2)—

(a) 25amounts given by a person connected with a relevant
party are treated as given by the relevant party;

(b) amounts given to a person connected with a relevant party
are treated as given to the relevant party.

References in this paragraph to a person connected with a relevant
30party do not include a person who is a relevant party.

(6) If the subject-matter of the implemented transaction is not the
whole subject-matter of the original contract—

(a) the amounts that are taken for the purposes of sub-
paragraph (2) to be given “for the acquisition of the
35chargeable interest” are to be determined on a just and
reasonable basis, and

(b) only so much of the consideration for a preceding
transaction as is referable, on a just and reasonable
apportionment, to the subject-matter of the implemented
40transaction is taken into account under sub-paragraph (2).

(7) In this paragraph—

(a) references to “the original contract” are to be read in
accordance with paragraph 12(5) (and references to “the
original purchaser” are to be read accordingly);

(b) “preceding transaction” means a pre-completion
transaction that precedes the implemented transaction in a
chain of successive pre-completion transactions (all having
at least part of their subject-matter in common).

5Relief for original purchaser: assignment of rights

15 (1) This paragraph applies where—

(a) a person would, in the absence of this paragraph, be liable
to pay tax in respect of a notional land transaction deemed
to take place under paragraph 5(1) or an additional land
10transaction deemed to take place under paragraph 5(2),
and

(b) the original contract had not been substantially performed
when the assignment of rights mentioned in paragraph
4(1) was entered into.

(2) 15If the purchaser claims relief under this paragraph in respect of the
notional land transaction or additional land transaction, no
liability to tax arises in respect of that transaction.

(3) Sub-paragraph (2) does not apply if the land transaction
mentioned in paragraph 4(4) is exempt from charge by virtue of
20any of sections 71A to 73 (which relate to alternative property
finance).

(4) Relief under this section must be claimed in a land transaction
return or an amendment of such a return.

Relief for original purchaser: qualifying subsales

16 (1) 25This paragraph applies if—

(a) the pre-completion transaction is a qualifying subsale,

(b) the original purchaser would, in the absence of this
paragraph, be liable to pay tax in respect of a land
transaction effected by the completion of the original
30contract or deemed to be effected by the substantial
performance of the original contract,

(c) the performance of the qualifying subsale takes place at the
same time as, and in connection with, the performance of
the original contract, and

(d) 35relief is claimed in respect of the land transaction
mentioned in paragraph (b).

(2) If the subject-matter of the qualifying subsale is the whole of the
subject-matter of the original contract, no liability to tax arises in
respect of the land transaction.

(3) 40If the subject-matter of the qualifying subsale is part (but not the
whole) of the subject-matter of the original contract, the amount of
the consideration for the land transaction is taken to be—

(a) the amount that it would be apart from this subsection, less

(b) so much of that amount as is referable to the subject-matter
45of the qualifying subsale.

(4) The amount mentioned in sub-paragraph (3)(a) may be reduced
more than once under sub-paragraph (3) if there is more than one
qualifying subsale.

(5) Sub-paragraphs (2) to (4) do not apply if—

(a) 5the original contract had been substantially performed
when the qualifying subsale was entered into, or

(b) the transaction effected, or deemed to be effected, by the
performance of the qualifying subsale is exempt from
charge by virtue of any of sections 71A to 73.

(6) 10Relief under this section must be claimed in a land transaction
return or an amendment of a land transaction return.

(7) For the purposes of this paragraph a contract for a land transaction
is taken to be “performed” when it is substantially performed or
completed (whichever is earlier).

(8) 15A pre-completion transaction is a “qualifying subsale” if it is a
contract under which the original purchaser contracts to sell the
whole or part of the subject-matter of the original contract to the
transferee.

Application of paragraph 16 to successive subsales

17 20If a transaction is a qualifying subsale in relation to more than one
contract such as is mentioned in paragraph 1(1)(a), paragraph 16
is to be applied separately in relation to each such original contract
for the purpose of determining what relief, if any, may be available
with respect to the land transaction in question.

25Tax avoidance arrangements

18 (1) Relief may not be claimed—

(a) under paragraph 15 if the assignment of rights referred to
in sub-paragraph (1)(b) of that paragraph forms part of any
tax avoidance arrangements, or

(b) 30under paragraph 16 if the qualifying subsale referred to in
sub-paragraph (1)(c) of that paragraph forms part of any
tax avoidance arrangements.

(2) Arrangements are “tax avoidance arrangements” if, having regard
to all the circumstances, it would be reasonable to conclude that
35the obtaining of a tax advantage for the original purchaser or any
other person was the main purpose, or one of the main purposes,
of the original purchaser in entering into the arrangements.

(3) In this paragraph “tax advantage” means—

(a) a relief from tax or increased relief from tax,

(b) 40a repayment of tax or increased repayment of tax,

(c) the avoidance or reduction of a charge to tax, or

(d) the avoidance of a possible assessment to tax.

(4) In this paragraph “arrangements” includes any agreement,
understanding, scheme, transaction or series of transactions
45(whether or not legally enforceable).

(5) Nothing in paragraphs 12 to 14 (minimum consideration rule) or
this paragraph affects the breadth of the application of sections
75A to 75C (anti-avoidance).

Exclusion of transactions from duty to make returns etc

19 (1) 5The Treasury may by regulations amend this Schedule, or any
provision of this Part of this Act relating to the making of returns,
so as to—

(a) exempt relevant purchasers of any specified description,
or in specified circumstances, from the duty to deliver a
10land transaction return,

(b) provide for relief under paragraph 15 or 16 to be available
without a claim in the case of any specified class of
transactions, or

(c) provide that paragraph 5 does not apply in specified cases.

(2) 15In this paragraph “relevant purchaser” means a person who is the
transferor under a pre-completion transaction.

Connected persons

20 Section 1122 of CTA 2010 (connected persons) applies for the
purposes of this Schedule.

20Interpretation of Schedule

21 (1) In this Schedule—

• “assignment of rights” has the meaning given by paragraph
  2(1);

• “contract” includes any agreement;

• 25“conveyance” includes any instrument;

• “free-standing transfer” has the meaning given by paragraph
  2(2);

• “pre-completion transaction” (in relation to a contract such as
  is mentioned in paragraph 1(1)) has the meaning given by
  30paragraph 1(2);

• “qualifying subsale” has the meaning given by paragraph
  16(8);

• “the transferee”, in relation to a pre-completion transaction,
  has the meaning given by paragraph 1(2)(a);

• 35“the transferor”, in relation to a pre-completion transaction,
  has the meaning given by paragraph 2(3).

(2) In this Schedule—

(a) references to “the original contract” are to be read in
accordance with paragraph 1(1)(a);

(b) 40references to “the original purchaser” are to be read in
accordance with paragraph 1(1)(a) and see also sub-
paragraph (3);

(c) references to “part of the subject-matter of the original
contract” are to be read in accordance with paragraph 1(7);